Never Breach a Condition Precedent
Protective Safeguard Endorsement is a Condition Precedent for There to be Coverage
Barry Zalma
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Barry Zalma, Esq., CFE
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Barry Zalma, Esq., CFE • You Insurance claims expert, consultant at Barry Zalma, Inc. and author/Publisher at ClaimSchool, Inc. 8m8 minutes ago
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In Mama K’s Diner, LLC v. AMCO Insurance Company, F082800, California Court of Appeals, Fifth District (January 17, 2023) the trial court granted summary judgment to AMCO Insurance because the insured did not maintain a promised automatic fire alarm system.
FACTS
Mama K’s sued AMCO for breach of contract and breach of the implied covenant of good faith and fair dealing, contending the damage is covered under the insurance policy it bought from AMCO. AMCO denies there is coverage because Mama K’s did not have an automatic fire alarm as required by the policy. The trial court granted summary judgment for AMCO.
As part of the insurance policy application, the broker submitted a form that erroneously stated Mama K’s had a central station fire alarm. AMCO issued Mama K’s an insurance policy with a “Protective Safeguards” endorsement conditioning coverage for fire damage on Mama K’s maintaining an automatic fire alarm protecting the entire building.
The policy warned:
‘YOU RISK THE LOSS OF CERTAIN INSURANCE COVERAGE AT PREMISES DESIGNATED IN THE DECLARATIONS IF YOU FAIL TO MAINTAIN ANY OF THE APPLICABLE PROTECTIVE SAFEGUARDS, LISTED BY SYMBOL IN THE DECLARATIONS FOR EACH PREMISES.’
On December 26, 2018, a fire caused substantial damage to the restaurant. Mama K’s submitted a claim to AMCO. The fire happened at 1:00 a.m. when no one was inside the restaurant to press the “fire” button on the keypad.
DISCUSSION
The Breach Of Contract Cause Of Action
The Court of Appeal concluded the grant of summary judgment on the first cause of action was proper based on the theory of breach alleged in the complaint.
The maintenance of the automatic fire alarm was a condition precedent for fire coverage which Mama K’s failed to satisfy, and therefore Mama K’s cannot maintain its suit against AMCO for breach of contract.
The judgment was affirmed.
ZALMA OPINION
Conditions precedent are important promises made by an insured. In this case Mama K’s promised to maintain an automatic fire alarm system as a condition of coverage for fire. Mama K’s failed to do so, it only had an automatic burglar alarm, and failed to keep its promise. People insured, just like insurers, must keep the promises they make. Mama K’s found out what happens when they failed to keep the promises made.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Jury’s Findings Interpreting Insurance Contract Affirmed
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In Madelaine Chocolate Novelties, Inc., d.b.a. The Madelaine Chocolate Company v. Great Northern Insurance Company, No. 23-212, United States Court of Appeals, Second Circuit (June 20, 2025) affirmed the trial court ruling in favor of the insurer.
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ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
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People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
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